DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $229.37 +3.42*

Hogs: Steady Futures: Mixed Lean Equiv: $131.31 +1.56**

* based on formula estimating live cattle equivalent of gross packer revenue.

(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle could not extend the gains of Wednesday as traders saw the possibility of only steady to slightly higher cash this week. The anticipation of early trade this week on the idea packers needed to increase ownership of supply to meet strong demand and take advantage of skyrocketing boxed beef, has not materialized. This has pushed cash trade to the usual second half of the week. There were a few trades in the South at $121, which is steady with last week. Asking prices are generally at $123. Feedlots do not want to lower those offers due to the large daily increases in boxed beef prices over the past few weeks.

Wednesday, boxed beef prices jumped with choice cuts up $5.48 and select cuts up $3.38. Packers just do not want to pay much more as they see the strong demand waning after Labor Day. However, with packer margins very high, they can afford to step up as even a drop of boxed beef will leave plenty of margin. Satisfying demand should be the priority, otherwise market share may be reduced. Weekly export sales will be released Thursday morning, but it may have about as much impact as last week, leaving the market sideways. Traders will be focused on The World Agricultural Supply and Demand report to be released Thursday morning.

After a period of wobbly trading, hog futures finally found their legs with October and December coming to life, posting triple-digit gains. There seemed to be some confidence developing over the possibility of cutouts finally finding support. Traders decided to buy back into the market due to technical support holding and futures being oversold. Later futures contracts showed a mixed close as traders were not sure of longer-term demand. Weekly exports sales will be released Thursday morning and will need to see further purchases from China and strong sales overall. However, strong export sales last week did not provide support to the market. Saturday slaughter is projected at 79,000 head.

	BULL SIDE		BEAR SIDE
1)	There is a strong possibility that packers will need to bid higher in order to obtain the cattle they need as feedlots are holding firm asking prices.	1)	Packers seem to be willing to hold out and hopefully limit the amount they need to pay for cattle even if they are running tighter on current supply.
2)	Strong demand for beef, tightening cattle supplies and current marketings, should result in higher cash.	2)	Cattle futures remain in a sideways pattern, searching for direction but finding none as of yet.
3)	The rebound of hog futures should generate further buying as price support held and traders see potential strength developing in cutouts.	3)	Packers have been a bit more aggressive with purchasing hogs but have been able to obtain what they need on limited price increases.
4)	October hog futures still has a price gap a little over $4.00 higher that needs to be filled.	4)	The bounce from technical support may not mean much if strength in cutouts does not continue and exports sales indicate slower international demand.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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